2015 NAR Investment And Vacation Home Buyers Survey

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2 2015 NAR Investment And Vacation Home Buyers Survey NATIONAL ASSOCIATION OF REALTORS Research Division April 2015

3 2015 NAR Investment and Vacation Home Buyers Survey Contents Introduction... 3 Market Environment... 3 The Composition of Residential Sales... 3 Property Characteristics... 3 Optimism and the Future... 4 Methodology... 4 Exhibit 1: Investment and Vacation Home Sales and Prices... 5 Exhibit 2: Property Characteristics... 6 Exhibit 3: Method of Purchase and Financing... 7 Exhibit 4: Buyer Motivations and Expectations... 8 NATIONAL ASSOCIATION OF REALTORS 2

4 2015 NAR Investment and Vacation Home Buyers Survey Introduction Traditionally, the majority of home buyers make a primary residence their purchase. However, some buyers purchase a vacation home to use for a family retreat or to purchase for a principal residence in the future, and some investors purchase a home to rent to others or to diversify their investments. By surveying nearly 2,000 adults online who purchased a home in the last year, the NAR Investment and Vacation Home Buyers Survey breaks down the share of home sales by primary residences, vacation homes, or investment properties, and presents several characteristics of the non-primary residence transaction. Market Environment In many areas of the country, home sales in 2014 were dampened by low housing inventory. As inventory tightened, home prices rose. While this growth in home prices was good for many owners and potential sellers, it shut out many first-time home buyers. The first-time home buyer share among primary residence buyers dipped to lows not seen since In some areas of the country, however, as investors and vacation buyers report, there are still real estate deals to be found. The Composition of Residential Sales In 2014, the share of buyers who purchased a primary residence dropped from 67 percent to 60 percent. The share of vacation home buyers continued rising to 21 percent from 13 percent. This is a percent change of 57.4 percent since 2013 and the highest share of vacation buyers recorded in this data set. The share of investment buyers continued declining slightly to 19 percent from 20 percent. While buyers of primary residences typically purchase homes because of the desire to be a home owner or due to a job relocation, buyers of vacation and investment homes are motivated by other factors. One-third of vacation home buyers plan to use their property for vacations or as a family retreat, 19 percent plan to convert their vacation home into their primary residence in the future, 13 percent bought for potential price appreciation and 13 percent purchased because of low real estate prices and the buyer found a good deal. Thirty-seven percent of investment property buyers purchased the home to rent to others, 17 percent purchased because of low real estate prices and the buyer found a good deal, and 15 percent for potential price appreciation. Property Characteristics The median price of primary residences continued climbing as it has since In 2014 the price increased 5.8 percent to $199,900 from the 2013 median price of $189,000. The share of primary buyers who used a mortgage has remained nearly flat, at nearly three-quarters of buyers. Forty-five percent of vacation buyers and 44 percent of investors purchased a distressed property (a foreclosure or a short sale). The median vacation and investor home purchase price was lower in 2014 than in The typical price was $150,000 for vacation buyers and $125,000 for investors. The share of vacation buyers who paid all cash fell slightly to 30 percent from 38 percent. The share of investors who paid all cash also dipped to 41 percent from 46 percent. However, when both vacation buyers and investors are financing their home purchase, more than four in ten are financing less than 70 percent. Among vacation buyers, 22 percent purchased in a resort area and 19 percent purchased in a small town higher than other buyer types. Forty percent of vacation buyers purchased in a beach area, 19 percent NATIONAL ASSOCIATION OF REALTORS 3

5 2015 NAR Investment and Vacation Home Buyers Survey purchased in the country, and 17 percent purchased a vacation home in the mountains. The typical vacation property was 200 miles from the buyers primary residence, while the typical investor property was 24 miles from their primary residence. The typical investment buyer plans to own their investment home for five years. Optimism and the Future Buyers of primary residences, vacation homes, and investment properties were active in the market despite hurdles they may face with low inventory and tight financing. More than 80 percent of vacation buyers and investment buyers reported that now is a good time to purchase real estate. Sixty-eight percent of investment buyers are likely to buy another investment property, and 49 percent of investment buyers are likely to purchase a vacation property in the next two years. Similarly, 66 percent of vacation buyers are likely to purchase an investment property and 58 percent are likely to purchase another vacation property in the next two years. Among primary residence buyers, 41 percent are likely to buy an investment property and 45 percent are likely to buy a vacation property in the next two years. Methodology In March 2015, a sample of households that had purchased any type of residential real estate during 2014 was surveyed. The survey sample was drawn from a representative panel of U.S. adults monitored and maintained by an established survey research firm. A total of 1,971 qualified adults responded to the survey. Respondents were sampled to meet age and income quotas representative of all home buyers drawn from the 2014 NAR Profile of Home Buyers and Sellers. The share of primary residence buyers was 60 percent, the share of vacation buyers was 21 percent, and the share of investment buyers was 19 percent. NATIONAL ASSOCIATION OF REALTORS 4

6 2015 Investment and Vacation Home Buyers Survey Exhibit 1: Vacation and Investment Property Sales and Prices Primary Residences Vacation Investment Share of Home Sales by Intended Use % 12% 22% New and Existing Home Sales (000)* , , , , ,023 1,019 2, ,817 1,067 1, , , , , , , , , , , , ,226 1,129 1,022 Pct change Median Sales Price $190,000 $148, $204,100 $183, $200,000 $150, $199,500 $195,000 $150, $196,000 $150,000 $108, $185,000 $169,000 $105, $176,700 $150,000 $94, $167,700 $121,300 $100, $170,000 $150,000 $115, $189,000 $168,700 $130, $199,900 $150,000 $125,000 Pct change *Home sales were calculated based on a proportion of buyers who bought each respective home type vacation, investment, and primary residence. The number of purchases for each housing type were calculated using the total number of existing home sales and new homes in NATIONAL ASSOCIATION OF REALTORS Research Division April 2015

7 2015 Investment and Vacation Home Buyers Survey Exhibit 2: Property Characteristics Primary Residences Vacation Investment Location of Property Small town 14% 19% 16% Rural area Suburb/Subdivision Urban area/central city Resort area Type of Location Beach - 40% - Country Mountain Lake Front Ranch Other Region of Home Purchase Northeast 19% 15% 17% Midwest South West Type of Property Detached single-family 74% 54% 61% Townhouse or row house Condo/duplex in building with 2 to 4 units Condo/apartment in building with 5 or more units Other Size of Property 500 sq ft or less 8% 15% 11% 501 sq ft to 1,000 sq ft ,001 sq ft to 1,500 sq ft ,501 sq ft to 2,000 sq ft ,001 sq ft to 2,500 sq ft ,501 sq ft to 3,000 sq ft ,001 sq ft or larger Median (square feet) Distressed Sale Home in foreclosure 21% 27% 23% Short sale Not a distressed sale Distance from Primary Residence 5 miles or less - 5% 22% 6 to 10 miles to 15 miles to 20 miles to 50 miles to 100 miles to 250 miles to 500 miles to 1,000 miles ,001 miles or more Median (miles) NATIONAL ASSOCIATION OF REALTORS Research Division April 2015

8 2015 Investment and Vacation Home Buyers Survey Exhibit 3: Method of Purchase and Financing Primary Residences Vacation Investment Household Income (2014) Less than $45,000 19% 11% 14% $45,000 to $74, $75,000 to $99, $100,000 or more Median $79,650 $94,380 $87,680 Number of Household Income Earners None 7% 3% 5% One Two Three or more Purchase Method Through a real estate agent or broker 58% 45% 50% Directly from owner whom the buyer knew Directly from owner whom the buyer didn t know Directly from builder or builder s agent Other First Step Taken in the Home Buying Process Looked online for properties for sale 24% 20% 21% Contacted a real estate agent Visited open houses Contacted a bank or mortgage lender Drove-by homes/neighborhoods Contacted a home seller directly Looked up information about different neighborhoods and areas Looked online for information about the home buying process Talked with a friend or relative about the home buying process Contacted builder/visited builder models Other Where Buyer Found the Home They Purchased Online 48% 48% 43% Real estate agent Friend, relative or neighbor Yard sign/open house sign Home builder or their agent Directly from sellers/knew the sellers Print newspaper advertisement Home book or magazine Mortgage Financing Used a mortgage 73% 70% 59% Did not use a mortgage Don't know Percent of Purchase Price Financed Less than 70% 36% 48% 41% 70% to 79% % to 89% % to 94% % to 99% % Entire purchase price Difficulty of Mortgage Application and Approval Process Much more difficult than expected 14% 18% 12% Somewhat more difficult than expected Not difficult/just what expected Less difficult than expected * Less than 1 percent NATIONAL ASSOCIATION OF REALTORS Research Division April 2015

9 2015 Investment and Vacation Home Buyers Survey Exhibit 4: Buyer Motivation and Expectations Primary Residences Vacation Investment Reasons for Purchasing Home To use for vacations or as a personal/family retreat - 33% 8% For future retirement Potential for price appreciation Low real estate prices/good deal To generate income through renting property Low mortgage rates Other Length of Time Buyer Plans to Own Property Have already sold this property 2% 4% 2% Less than 1 year to 2 years to 5 years to 10 years or more years Don t know Median (years) Likelihood of Buying an Investment Property in Next 2 Years Very likely 17% 31% 24% Somewhat likely Somewhat unlikely Very unlikely Don't know Likelihood of Buying a Vacation Property in Next 2 Years Very likely 19% 28% 21% Somewhat likely Somewhat unlikely Very unlikely Don't know Now is a Good Time to Purchase Real Estate Good time to purchase 78% 85% 86% Not a good time to purchase Don't know NATIONAL ASSOCIATION OF REALTORS Research Division April 2015